Monday, August 29, 2011

The gold rush

A Gallup poll has found that more Americans think gold is the best long-term investment than anything else -- including stocks, bonds, and real estate.

Good news if you have gold in your portfolio? On the surface, yes. More believers might mean more buyers, which would push up the price. But, like everything else in the investment world, it's not so simple.

The question was abstract: "Which of the following do you think is the best long-term investment?" Those who chose gold as their favored investment didn't say they planned to buy gold. With the American economy in a wreck and horrid unemployment numbers, it's likely many of the respondents won't be able to.

Further, the contrarian take is that when any asset class gets wildly popular, it becomes correspondingly more dangerous. As Kid Dynamite puts it: "If you don't understand why crowd sentiment is a contrarian indicator, think about this oversimplification: when everyone is bullish, there's no one left to turn bullish." (Thanks, KD, for the link to Gallup.)

The metal has popped from about $275 at the end of 2001 to $1,773 at today's close. Bubble? Are we due for a reversion to the mean? It's anybody's guess, but gold went vertical in the early '80s before cratering, leaving a lot of disappointed latecomers to the game.

I currently find myself in the unusual situation of agreeing with the conventional wisdom, which is that you should keep 5 to 10 percent of your liquid worth in gold. It can't go bankrupt and the metal itself can't have a scandal, although there are those who believe the ETFs that hold gold are only "paper" and if you want to be safe, you should hoard gold coins or bars.

Too King Midas-y and apocalyptic for me. I'll take my chances with an ETF. I go with the ETF Securities Physical Swiss Gold fund (SGOL) rather than the more popular GLD. First, because it's based in Switzerland (although the gold bullion itself is stashed in London -- I wish it weren't, but there are few places in the world where large quantities of gold can be stored safely). Second, I figure if there's any messing around, it's more likely to happen in the bigger ETF.

Only 17 percent of the Americans questioned thought stocks would be best for the long term. That seems short sighted. Right now you can buy blue chip companies with a 4 or 5 percent dividend yield ... not too shabby when bonds pay you in Hershey's Kisses for tying up your money.

The useful WallStreetNewsNetwork -- useful enough that I'll forgive them for "bumping" the words in their name -- offers this table of "High Cash, No Debt, High Yield" stocks. You may have to zoom in to read it (control + in Firefox.) Or go to WallStreetNewsNetwork and scroll down to the link to the table.

Note: I have been advised that my incorrect technique for pasting the table into the Blogger form caused the break with previous postings, and have therefore removed the table. You can still access it via the link above.

Disclaimer: I have no qualifications as an investment adviser and this is not advice. I have often been wrong. Always get a second opinion: your own.

Under Posting - Edit Posts, there should be an option at the far right of the screen labeled Posts Per Page. It think it defaults to 25, but yours may have been changed due to a glitch. That's all I could find; it's annoying that there is no general View tab.

"A Gallup poll has found that more Americans think gold is the best long-term investment than anything else -- including stocks, bonds, and real estate."

These are likely the same morons who speak in Realtor-speak (that is, always refer to a house -- building -- as a home) and who swallowed the Big Realty lie that buying a "home", especially if it's a McMansion, is an "investment".

Buying the house you plan to live in is not an investment. Buying the diamond you plan to give your wife is not an investmant. Buying gold is not an investment -- it is, at best, parking your money.

Olympus, where the abode of the gods stands firm and unmoving forever, they say, and is notshaken with windsnor spattered with rains,nor does snow pile ever there, but the shining bright airstretches cloudless away,and the white lightglances upon it.

MONEY

Zero Hedge: Everything you need to confirm your worst fears about the economy.

Market Folly: Learn from the hedge fund titans as they gain, or lose, hundreds of millions.

Charles Hugh Smith: "Consumerism is psychological/spiritual junk food ... well-being is increased by everything that cannot be commoditized by a market economy or financialized by a cartel-state financial machine -- friendship, family, community, self-cultivation -- rather than by acquiring more."